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Record Q3 for UK dividends

October 2018

Concerns about Brexit, global economic growth, geopolitical issues and monetary tightening undermined investors’ confidence during October and share prices generally fell. Over the month, the FTSE 100 Index fell by 5.1% while the FTSE 250 Index dropped by 6.8%. Meanwhile, the yield on the FTSE 100 Index rose from 4.01% to 4.25%, while the FTSE 250 Index’s yield climbed from 2.85% to 3.05%. 

  • UK equity yields rose sharply in October
  • Banks and miners drove dividends in Q3
  • Demand for UK equity income funds picked up

To view the series of market updates through October, click here


Concerns about Brexit, global economic growth, geopolitical issues and monetary tightening undermined investors’ confidence during October and share prices generally fell. 

“Problems on the high street continued to take their toll on profits and payouts”

Over the month, the FTSE 100 Index  fell by 5.1% while the FTSE 250 Index  dropped by 6.8%. Meanwhile, the yield on the FTSE 100 Index rose from 4.01%   to 4.25% , while the FTSE 250 Index’s yield climbed from 2.85%  to 3.05% . In comparison, the benchmark UK government bond yield declined from 1.46%  to 1.26% .

Over the year to date , the FTSE 100 Index and FTSE 250 Index have fallen by 7.3% and 8.7% respectively. Since the start of the year, the best-performing FTSE sectors  include technology hardware & equipment, industrial metals & mining, food & drug retailers, and pharmaceuticals and biotechnology. The worst-performing sectors include mobile telecommunications, software & computer services, tobacco, and industrial transport.

Dividends paid out by UK-listed companies achieved a record third quarter in the three months to September, rising at an annualised rate of 4.1% to reach £32.3 billion. According to Link Asset Services’ Dividend Monitor , headline dividend payouts could reach £100 million by the end of 2018. Third-quarter performance was boosted by sterling’s weakness and a strong contribution from the mining and banking sectors. 

Although mining companies made the biggest contribution to total payouts over the period, Link Asset Services expects momentum in the sector to ease and dividends from the banking sector to rise. During October, Royal Bank of Scotland (RBS) paid out its first dividend  since 2008, when the bank had to be rescued by the taxpayer. RBS paid two pence per share to ordinary shareholders. In contrast, problems on the high street continued to take their toll on profits and payouts in the beleaguered retailing sector. Next did not pay a special dividend this year; Debenhams halved its payment; other major retailers – including M&S – held their dividends flat. 

Demand for funds in the UK Equity Income sector rose during September to levels last seen over a year ago, according to the Investment Association (IA) , and the sector ranked in the top ten most popular IA sectors over the month, experiencing net retail inflows of almost £80 million. In general, however, UK equity funds remained out of favour during September, and the mainstream UK All Companies sector remained the most unpopular IA sector overall.


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